Hoping to regain some value for their holdings, last week a group of private investors proposed buying the insurance operations of the government sponsored enterprises, pitching the deal as a way to increase private capital in the mortgage market, and move forward with housing-finance reform, according to a letter from Fairholme Capital Management.

However, Gene Sperling, director of the administration’s National Economic Council, said at a Wednesday housing-finance symposium, that recapitalizing the firms in their current form is a bad idea, even if it’s without an implicit government guarantee, according to transcript excerpts published by The Wall Street Journal.

“The risks are simply too great that this model will recreate the problems of the past,” Sperling said. “New entrants could rightfully fear that GSEs would have an infrastructure advantage given their legacy pipeline and relationships.”

Congress is working on legislation to reform the U.S. housing-finance system, but analysts say final approval is far off given fundamental disagreement over the appropriate role for the government moving forward. The government put Fannie and Freddie into conservatorship more than five years ago, but there’s concern that improving profits, which are sent to the U.S. Treasury Department, are dimming the urgency for reform.